An impermanent loss calculator is useful only if you use realistic price changes and then compare the result with the fees a pool can actually generate. Using October 7, 2025 to October 7, 2026 as a 12-month test, an ETH/USDC position would show about 3.44% impermanent loss under the standard constant-product model, before fees and other returns. The result shows why LP decisions should start with expected price divergence, not headline APY.
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How the 12-Month Test Works
For a standard 50/50 constant-product pool, the impermanent loss formula is:
IL = 2 × √r / (1 + r) - 1
Here, r is the change in the price ratio between the two assets.
For a volatile asset paired with USDC, the calculation is straightforward because USDC is designed to stay close to $1. But this is only an endpoint test. It does not include trading fees, incentives, gas, or the path the price took during the year.
For the underlying calculation, see Impermanent Loss Explained With Simple Math.
ETH/USDC: The 12-Month Result
ETH closed at about $4,451.15 on October 7, 2025, and $2,613.32 on October 7, 2026.
With USDC remaining close to $1, the ETH/USDC price ratio fell to about 0.587 of its starting level. The standard calculator therefore produces approximately -3.44% impermanent loss.
|
Test |
Starting price |
Ending price |
Endpoint IL |
|
ETH/USDC |
ETH $4,451.15 |
ETH $2,613.32 |
-3.44% |
|
BTC/USDC |
BTC about $121,000* |
BTC $84,045.60 |
About -1.7% |
|
USDC/USDT |
Near $1 |
Near $1 |
Near 0% |
*The BTC starting figure is approximate because the available historical source used here does not expose the October 7, 2025 row in the retrieved page. The BTC endpoint price is from October 7, 2026.
The important point is that 3.44% does not mean the LP lost 3.44% of its entire investment. It means the simplified LP position underperformed simply holding the original ETH and USDC by roughly that percentage, before fees.
For a $10,000 starting position, that represents about $344 of relative underperformance in this simplified scenario.
Why the Calculator Is Only a Starting Point
A real LP position does not experience only the starting and ending prices.
Trading fees can offset impermanent loss, while a volatile price path can create different exposure from what an endpoint-only calculation suggests. Concentrated liquidity adds another variable because the position may stop earning fees when price leaves its range.
Before depositing, check:
- Expected price divergence between the two assets.
- Trading volume relative to pool liquidity.
- Fee rate and realistic fee income.
- Whether the position can remain active.
- Incentive-token price and liquidity.
- Gas and rebalancing costs.
- Smart-contract and token risks.
The useful question is therefore not "What is my IL?" but "How much fee income do I need to overcome this IL, and is that income realistic?"
Uniswap v3: Range Risk Changes the Calculation
Uniswap v3 lets LPs concentrate liquidity inside a chosen price range. This can make capital more efficient, but the position stops earning fees when the market moves outside that range.
That makes a normal IL calculator incomplete for a concentrated position.
|
Factor |
Why it matters |
|
Price divergence |
Creates the basic IL exposure |
|
Price range |
Determines whether liquidity remains active |
|
Trading volume |
Determines potential fee income |
|
Rebalancing |
Can restore fee generation but adds costs. |
|
Fee tier |
Changes the amount earned per swap |
Uniswap currently lists 0.01%, 0.05%, 0.30%, and 1% v3 fee tiers, although the appropriate tier depends on the pair and market.
Curve and Stablecoin Pools
Curve is a different case because its StableSwap design is built for stablecoins and other assets expected to maintain similar values. Its invariant is designed to provide lower slippage around the expected peg.
USDC was around $1.0001 on October 7, 2026, while USDT was around $1.0005 on the same date.
That produces very little endpoint IL compared with ETH/USDC.
But low IL does not mean low overall risk. A stablecoin LP can still face depeg risk, smart-contract risk, liquidity risk, and losses caused by an asset breaking its expected correlation.
Aerodrome: Another Concentrated-Liquidity Case
Aerodrome also offers concentrated pools where liquidity is placed within defined price ranges. Its documentation states that concentrated pools require maintenance or automated liquidity management, and its fee APR calculation depends on liquidity around the active price range.
That makes Aerodrome similar to Uniswap v3 in one important respect: headline APR is not enough.
For a concentrated Aerodrome pool, I would check:
- How much liquidity is actually in range.
- Recent trading volume.
- Fee income rather than only incentive APR.
- The value and liquidity of reward tokens.
- How often the position would need rebalancing.
Which Strategy Makes More Sense?
|
Situation |
Better starting point |
Why |
|
Want minimal IL exposure |
Stablecoin pool |
Assets should remain close in value |
|
Want ETH exposure and fees |
Uniswap v3 |
Strong concentrated-liquidity infrastructure |
|
Want Base-focused liquidity |
Aerodrome |
Concentrated pools and Base ecosystem exposure |
|
Expect one token to strongly outperform |
Holding |
Avoids selling the outperformer through the AMM |
|
Expect a volatile pair to trade in a range |
Active LP |
Fees can compensate for the rebalancing cost |
The biggest distinction is directional conviction versus fee conviction.
If you expect ETH to outperform USDC substantially, simply holding ETH may be better than providing ETH/USDC liquidity. If you expect a volatile pair to trade within a range with strong volume, LPing becomes more attractive because fee income has a better chance of covering IL.
For a deeper look at whether protection mechanisms actually reduce the underlying risks, see Do Impermanent Loss Protection Strategies Actually Reduce DeFi Risks.
My Take
I would use an impermanent loss calculator before looking at the advertised APY.
For stable or tightly correlated pairs, the IL problem is naturally smaller, so the strategy can make sense if liquidity and smart-contract risks are acceptable. For volatile pairs, I would only LP when the expected fee income is strong enough to compensate for realistic price divergence, and I am comfortable managing the position.
The calculator should be treated as a stress test, not a profit forecast. Run several exit prices, calculate the IL at each level, estimate realistic fees, and then compare the result with simply holding the assets.
Common Mistakes
- Treating IL as the same thing as an actual dollar loss.
- Assuming today's APY will last for 12 months.
- Ignoring the time a concentrated position spends out of range.
- Counting incentive tokens at their current value without considering their price risk.
- Comparing LP returns with cash instead of the original tokens.
- Ignoring gas and rebalancing costs.
- Assuming stablecoin pools cannot lose money during a depeg.
Conclusion
The 12-month ETH/USDC test produces about 3.44% endpoint impermanent loss from the change in ETH's price ratio between October 7, 2025 and October 7, 2026. That is not the complete return of an LP position because fees, incentives, gas, and the actual price path still matter.
The practical lesson is simple: calculate IL first, then ask whether the pool can realistically earn enough fees to compensate for it. If the strategy only works with an optimistic APY and a favorable price assumption, holding the assets may be the better choice.
FAQs
1. What does a 3.44% impermanent loss mean?
It means the simplified LP position trails holding the original assets by about 3.44% at the tested endpoint. It does not include trading fees, incentives, gas, or other returns.
2. Does an impermanent loss calculator include trading fees?
Most basic calculators isolate the price-based IL calculation. You need a separate fee estimate to determine whether the LP strategy can outperform simply holding.
3. Is impermanent loss lower for stablecoin pools?
Usually, because the assets are designed to remain close in value. Depegs can still create significant losses when the expected price relationship breaks.
4. Why is Uniswap v3 harder to evaluate with a basic IL calculator?
Concentrated liquidity can become inactive when price leaves the selected range. An out-of-range position does not earn fees until price returns to that range.
5. Should I provide liquidity or just hold the tokens?
Holding is often preferable when you expect one asset to strongly outperform the other. LPing becomes more attractive when expected fee income is high, and the price relationship is likely to remain relatively stable.
References
Uniswap Labs, What does out-of-range liquidity mean? https://support.uniswap.org/hc/en-us/articles/32514988932877-What-does-out-of-range-liquidity-mean?.com
Uniswap Labs, What is a liquidity provider fee? https://support.uniswap.org/hc/en-us/articles/20901935681677-What-is-a-liquidity-provider-LP-fee?.com
Investing.com, Bitcoin Historical Data. https://www.investing.com/crypto/bitcoin/historical-data?.com
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About the Author: Chanuka Geekiyanage
Chanuka is a content writer, editor and contributor at Panaprium, specializing in long-form editorial articles. He conducts in-depth research and produces well-structured, carefully edited content with a strong focus on clarity, SEO best practices, and consistent formatting. His work spans lifestyle, fashion, wellness, and technical topics, and all articles are reviewed and refined to meet Panaprium’s editorial standards.
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